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ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

This section contains forward-looking statements that involve risk and
uncertainties. Actual results could differ materially from those projected in
these forward-looking statements. The following disclosures are before
consideration of any impacts resulting from the application of Statement of
Financial Accounting Standards ("SFAS") No. 133 beginning January 1, 2001. See
Note 1 of Notes to Consolidated Financial Statements for a discussion of the
impacts of SFAS No. 133.

The Company's operating results are sensitive to changes in the prices of
alumina, primary aluminum, and fabricated aluminum products, and also depend to
a significant degree upon the volume and mix of all products sold. As discussed
more fully in Notes 1 and 13 of Notes to Consolidated Financial Statements, KACC
utilizes hedging transactions to lock- in a specified price or range of prices
for certain products which it sells or consumes in its production process and to
mitigate KACC's exposure to changes in foreign currency exchange rates. The
following sets forth the impact on future earnings of adverse market changes
related to KACC's hedging positions with respect to commodity, foreign exchange
and energy contracts described more fully in Note 13 of Notes to Consolidated
Financial Statements.

Alumina and Primary Aluminum. Alumina and primary aluminum production in excess
of internal requirements is sold in domestic and international markets, exposing
the Company to commodity price opportunities and risks. KACC's hedging
transactions are intended to provide price risk management in respect of the net
exposure of earnings resulting from (i) anticipated sales of alumina, primary
aluminum and fabricated aluminum products, less (ii) expected purchases of
certain items, such as aluminum scrap, rolling ingot, and bauxite, whose prices
fluctuate with the price of primary aluminum. On average, before consideration
of hedging activities, any fixed price contracts with fabricated aluminum
products customers, variations in production and shipment levels, and timing
issues related to price changes, the Company estimates that each $.01 increase
(decrease) in the market price per price-equivalent pound of primary aluminum
increases (decreases) the Company's annual pre-tax earnings by approximately
$10.0 - $15.0 million, based on recent fluctuations in operating levels.

Based on the average December 2000 London Metal Exchange ("LME") cash price for
primary aluminum of approximately $.71 per pound, the Company estimates that
there would be no material net aggregate pre-tax impact on operating income from
its hedging positions and fixed price customer contracts during the period 2001
through 2003. The Company estimates that a hypothetical $.10 increase from the
above stated December 2000 price would result in a net aggregate pre-tax
decrease in operating income of approximately $75.0 million being realized
during the period 2001 through 2003 from KACC's hedging positions and fixed
price customer contracts. Conversely, the Company estimates that a hypothetical
$.10 decrease from the above stated December 2000 price level would result in an
aggregate pre-tax increase in operating income of approximately $130.0 million
being realized during the period 2001 through 2003 from KACC's hedging positions
and fixed price customer contracts. Both of the foregoing hypothetical amounts
are versus what the Company's results would have been without the derivative
commodity contracts and fixed price customer contracts discussed above. It
should be noted, however, that, since the hedging positions and fixed price
customer contracts lock-in a specified price or range of prices, increases or
decreases in earnings attributable to KACC's hedging positions or fixed price
customer contracts are significantly offset by a decrease or increase in the
proceeds to be realized on the underlying physical transactions.

As stated in Note 13 of Notes to the Consolidated Financial Statements, KACC has
certain hedging positions which do not qualify for treatment as a "hedge" under
current accounting guidelines and thus must be marked-to-market each period.
Fluctuations in forward market prices for primary aluminum would likely result
in additional earnings volatility as a result of these positions. The Company
estimates that a hypothetical $.10 change in spot market prices from the
December 31, 2000, LME cash price of $.71 per pound would, depending on the
shape of the forward curve, result in additional aggregate mark-to-market
impacts of between $10.0-$30.0 million during any period through 2003.

In addition to having an impact on the Company's earnings, a hypothetical
$.10-per-pound change in primary aluminum prices would also impact the Company's
cash flows and liquidity through changes in possible margin advance
requirements. At December 31, 2000, KACC had made margin advances of $5.1
million and had posted letters of credit totaling $5.0 million in lieu of paying
margin advances. Increases in primary aluminum prices subsequent to December 31,
2000, could result in KACC having to make additional margin advances or post
additional letters of credit and such amounts could be significant. If primary
aluminum prices increased by $.10 per pound (from the year-end 2000 price) by
March 31, 2001 and the forward curve were as described above, it is estimated
that KACC could be required to make additional margin advances in the range of
$50.0 to $100.0 million.

Foreign Currency. KACC enters into forward exchange contracts to hedge material
cash commitments for foreign currencies. KACC's primary foreign exchange
exposure is related to KACC's Australian Dollar (A$) commitments in respect of
activities associated with its 28.3%-owned affiliate, Queensland Alumina
Limited. The Company estimates that, before consideration of any hedging
activities, a US $0.01 increase (decrease) in the value of the A$ results in an
approximate $2 million (decrease) increase in the Company's annual pre-tax
operating income.

KACC's foreign currency hedges would have no net aggregate pre-tax impact on the
Company's operating results for the period 2001 through 2005 at the December 31,
2000 US$ to A$ exchange rate of $.55. The Company estimates that a hypothetical
10% reduction in the A$ exchange rate would result in the Company recognizing a
net aggregate pre-tax cost of approximately $10.0 million for the period 2001
through 2005 from KACC's foreign currency hedging positions. Conversely, the
Company estimates that a hypothetical 10% increase in the A$ exchange rate (from
$.55) would result in the Company realizing a net pre-tax aggregate benefit of
approximately $20.0 million. These hypothetical impacts are versus what the
Company's results would have been without the Company's derivative foreign
currency contracts. It should be noted, however, that, since the hedging
positions lock-in specified rates, increases or decreases in earnings
attributable to currency hedging instruments would be offset by a corresponding
decrease or increase in the value of the hedged commitments.

Energy. KACC is exposed to energy price risk from fluctuating prices for fuel
oil, diesel oil and natural gas consumed in the production process. The Company
estimates that each $1.00 change in natural gas prices (per mcf) impacts the
Company's pre-tax operating results by approximately $20.0 million. Further, the
Company estimates that each $1.00 change in fuel oil prices (per barrel) impacts
the Company's pre-tax operating results by approximately $3.0 million.

KACC from time to time in the ordinary course of business enters into hedging
transactions with major suppliers of energy and energy related financial
instruments. As of December 31, 2000, KACC held option and swap contracts
hedging a substantial majority of its first quarter 2001 natural gas
requirements. The Company expects to realize a pre- tax benefit of approximately
$10.0 million in the first quarter of 2001 associated with these hedging
positions. However, it should be noted that these benefits will be offset by the
higher than normal gas prices on the physical gas deliveries received during the
first quarter of 2001.
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